Europe lower as we await Bailey’s pre-CPI comments

• European markets lower, but Bailey could help lift sentiment after cautious Fed tone
• Nvidia earnings come into view
• Canadian inflation could help bolster July rate cut hopes

European Markets are in the red today, with concerns over the pathway to lower rates denting sentiment after a period of relative optimism. The Dow appears to have met its match after the index turned swiftly lower from the 40k handle, representing the second such pullback from that hefty hurdle in the space of a week. In a week that looks to be dominated by central bank appearances, the cautious approach taken by the Fed members Bostic and Mester did little to lift expectations over the September cut currently priced in by the markets. Today sees comments from the Bank of England Governor Bailey, who should set out his stall ahead of tomorrow’s likely collapse in UK CPI inflation. With markets looking for headline inflation to fall back down towards the 2.3% region tomorrow, traders will be looking for Bailey to further shed light on the chance of a June rate cut given the wide disparity growing between headline and core inflation.

Today provides markets with their final chance to position themselves ahead of tomorrow’s pre-open release of earnings from Nvidia, with the tech giant providing perhaps the final major hurdle to overcome for first quarter earnings season. This year is expected to see Nvidia attempt to doubt its earnings per share, with the $12.96 reported for 2023 expected to surge into a figure closer to $25.15. However, the dramatic gains seen over the past year provide a tough backdrop for the business to operate within, as double-digit quarterly gains are the bare minimum. With big tech spending more than ever in a bid to gain a dominant position in the AI space, there is a hope that these purchases will be recurring and not front-loaded in nature. For investors, there is a desire to see strong growth, but also confidence that the pace of expansion will continue for a long time yet.

Looking ahead, Canadian inflation data provides a key metric that could provide major volatility for the CAD. While the Bank of Canada have been expected to largely move in tandem with the Fed, markets are growing increasingly confident that we will see them cut rate in July given the 2% core inflation rate currently in play. We have seen Canadian headline inflation trending well above the core reading for some time now, and there is a hope that today will bring a healthy decline from the March CPI figure of 2.9%.